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Investment glossary

Use this glossary of key investment terms to make choosing an investment a little simpler.

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An annual payment/receipt. Normally used to provide a retirement income. They can include:

Lifetime annuities – which provide you with an income for life, and can continue payements to a beneficiary an income after you die.

Fixed-term annuities – this provides an income for period of time, usually up to ten years, followed by a ‘maturity amount’.

Asset class

The asset class is what the money from your investment is actually put into, e.g. shares, bonds, property and cash deposits.

Base Rate

Is the rate charged by the Bank of England to other banks and other lenders when they borrow money. This is influences the interest rates charged for mortgages, loans and other types of credit.

Blue chip

An informal term used to refer to shares or a company that are financially stable (not likely to fail) on the stock market.


An agent who acts as an intermediary between buyers and sellers, usually for payment of a commission.


The money you initially invest in a business.

Capital growth

This is any increase in the original amount you invested, after costs, charges and depreciation.

Compound interest

This is the cumulative effect of earning interest on your savings and leaving your interest in the savings account.


A payment made to shareholders/unit holders from a company/investment group.


A payment made to shareholders/unit holders from a company/investment group.


Another name for shares. So if you buy equity, you're buying shares.


An increase in the level of prices of goods and services in the economy. It is measured by examining a typical basket of goods and services.

Liquid asset

An asset that can be quickly, easily and inexpensively turned into cash.

Open Ended Investment Company (OEIC)

A type of pooled investment fund, open ended investment funds can create new shares or cancel existing shares in issue.

Ordinary shares

A class of share usually associated with UK stock market investments. Shareholders have the right to receive distributed profits and vote at annual general meetings.

Paper loss

Also known as unrealised loss, this is where an asset or investment has decreased in value before you come to cash it in, i.e. your investment is worth less 'on paper'.


In simple terms this is an income plan for income to be received during retirement.

Personal allowance

The amount of income an individual can earn free of tax.

Pooled investment

Many people putting their money together into a single investment fund.


A collection of investments that can include any or all asset types.

Tax wrapper

Tax breaks that an investor can 'wrap' around their investment, so that they can are sheltered from paying some or all tax on it. The most common tax wrappers are ISAs and pensions.

Unit Trust

A group investment, which means funds have been pooled together and then managed by a fund manager.